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Thursday, March 8, 2018

Warren: "Bank reform increases chances of bank bailout"

I would say the exact opposite. They are removing the risk free component of the regulatory ratio that is the most volatile in amplitude and frequency.

This will REDUCE the likelihood of future systemic failure... may actually eliminate the likelihood completely.

Never send a trained lawyer to do applied mathematics; not qualified.

Senate Republicans voted unanimously for the #BankLobbyistAct. But this bill wouldn’t be on the path to becoming law without the support of these Democrats. The Senate just voted to increase the chances your money will be used to bail out big banks again. https://t.co/bfkEgNdl9C

Absolutely NOBODY has ever claimed that banks are not regulated. Stop using this ludicrous straw man argument. Who has ever claimed banks are not regulated? The issue is deregulation. The definition of which is "the act or process of removing restrictions and regulations". This is not the same as removing ALL and every regulation. Everybody knows there are restrictions and regulations on banks? How could they operate otherwise? So why do you continue to spin the line that those who criticise the current set-up claim that there are NO regulations? The issue is that the most useful and effective regulations against crises have been done away with. That bank regulation today is pretty much written by the banks and in the interests of the banks, not in the interests of the public.

Matt, I suggest you read it again. The definition could quite easily have said ""...ALL restrictions and regulations." It doesn't because that's not what it means. It obviously means SOME or MANY or even MOST restrictions and regulations. You are the only one who reads it to mean ALL restrictions and regulations.

If there are 1000 regulations and 900 are removed. That is deregulation, BY DEFINITION. What other term would you use? A decrease, I suppose, but everyone uses deregulation.

In any case, rather than concentrate on what you personally believe what the definition means, why don't you simply accept what the general understanding is? You're like one of those Austrians who claim inflation is an increase in the money supply. Everyone else understands inflation to mean a generalised increase in prices.

Matt, I literally have no idea what the bloody hell you're talking about. Apes and cruise control? Is this another weird denunciation of evolution or do you have something else in mind? Perhaps this is your unusual way of putting froward your "scientific" theory that all life just miraculously appeared from nowhere and for no reason?

Ralph there is both a numerator and a denominator in proportional regulation ...

So you can require banks to hold more capital which is in the numerator but then if one of the component variables in the denominator spikes you still end up in violation of the minimum required ratio... this is what typically happens...

. ie Deposit assets increase as tax revenues lead to surpluses in the Treasury deposit accounts... or the CB does Direct asset purchases ....

Both policies result in a spike in the denominator (Deposit assets at the CB) .... so you can require even full reserve banking but if policy leads to either a surplus or the CB does asset purchases then the depositories (banks) are going to exhibit a rapidly declining ratio...

Matt, I don't see the problem in enforcing a higher capital ratio. And nor, far as I know, do any of those who advocate a higher ratio, e.g. Martin Wolf, chief economics correspondent at the Financial Times and Anat Admati (Stanford economics prof), both of whom advocated a ratio of around 25%.

If a bank finds its deposits rise to fast relative to its capital, it has a choice: first turn away extra deposits, something banks have actually done over the last few years, which is a departure from their behavior over the last seventy years or so. Second option: issue more shares.

This is the case with everything having to do with regulating the RHS. Tom Hickey

The RHS would need far less regulating IF bank liabilities toward the non-bank private sector were genuine liabilities and not largely a sham as they now are. The way to accomplish this is to allow all citizens to have checking accounts at the central bank and to abolish all other privileges for the banks such as non-negative yielding* sovereign debt and deposit insurance.

The way to address risk directly is to regulate the LHS, through credit standards, for example. Tom Hickey

*Individual citizens, otoh, should have negative-interest-free checking accounts at the central bank up to, say, $250,000 per citizen. Together, this would encourage the flow of fiat from the rich to the poor.

The way to address risk directly is to regulate the LHS, through credit standards, for example. Tom Hickey [bold added]

Tell us Tom, who should be worthy of what is, in essence, the public's* credit but for private gain? Hmm?

*due to government privileges for private credit creation such as government-provided deposit insurance, a government-provided lender of last resort, positive yields on the inherently risk-free debt of monetary sovereigns, the exclusive access of banks and other depository institutions to inherently risk-free accounts at the central bank, etc.